To identify genes encoding novel proteins which act as suppressors of transformation, we developed a v-mos- transformed rat cell line (DTM) and a phenotypic revertant (F1) derived from these cells. Using differential display techniques, we isolated a cDNA clone which detected a 4.4 kb mRNA in normal rat fibroblasts and in the F1 revertant, but not in DTM cells. Transcription of this gene, designated drm, was not detectable in rat cells transformed by v-mos, v-src, v-ras, v-raf and v-fos. Drm mRNA correlated with cell transformation in rat cells conditionally transformed by ts110, a mutant ts for v-mos expression. Sequence analysis showed that the major orf of drm encodes a putative 13 kDa, 117 amino acid protein. Transcription/translation of this cDNA yielded a protein with an apparent molecular weight of 25 kDa. The putative protein contains a zinc-finger-like motif, glycosylation site, and putative CK2, cAMP-dependent, and PKC phosphorylation sites. The drm sequence is weakly homologous to the DAN family of tumor-suppressor genes. Drm in rat is expressed predominantly in kidney, brain, spleen and testis. Transfection of r-drm into several non-transformed cell lines reduce the colony-forming ability of the transfected cells over 90%, while cells stably transformed by mos or ras show no reduction in plating efficiency. Cells co-transfected with r-drm and oncogenic ras form colonies with efficiencies equivalent to controls co- transfected with ras and vector. The cDNA sequence of human DRM reveals only 3/185 amino acid changes between rat and man. DRM's properties suggest a possible role for the gene in maintaining the normal cell phenotype. We generated drug-selectable murine viruses containing mutations in the . . AATAAA . . polyadenylation signal. Cells infected by this virus express fusion RNAs containing viral and cellular sequences. We have analyzed the sequences present in fused messages, and analyzed the ability of these viruses to induce cell transformation in vitro. One tumorigenic isolate contains an in-frame fusion between a PKC-zeta binding protein viral sequence. At least one species of fused RNA expressed in these cells contains three copies of a novel 60 bp repeat sequence. The biological significance of these fused constructs to the transformed phenotype is under investigation.